Friday, September 24, 2010

It's Lack of Customers, Not Taxes...

Interesting item.

A combination of the slow economy, tight bank underwriting and a shortage of investors has stalled $504 million available locally for a tax credit program ...

This is a bit complicated:

The U.S. Treasury New Markets Tax Credits program is designed to encourage real estate development and business expansion in distressed areas. The Treasury allocates credits to community development groups affiliated with banks and local development agencies. Those groups, in turn, issue credits to companies and developers to enhance the capital structure of financing projects.

Some organizations that allocate the credits are ready to close deals, but can’t because the banks that used to buy the credits as a hedge against income tax payments don’t need the credits. The banks aren’t as profitable as they were before the recession and have less income tax to offset.

Who needs tax offsets when there's no damn income subject to tax?

By the way, the offsets are also commonly purchased by insurance companies such as NML.

HERE is the real problem:

Businesses seeking credits and banks that provide the senior financing for projects also have become less plentiful. If they’re pursuing projects, they are much more cautious and face challenges including luring tenants.

There is no DEMAND for development. No customers. No ringydingy on the cash-registers.

HT: Jo

1 comment:

J. Strupp said...

I guess we actually agree for a change.